Australian LNG plant operator Santos said it welcomed the New South Wales Independent Planning Commission (IPC) decision to give the go-ahead for its Narrabri Gas Project and thanked the local community for its strong support over many years.

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Australia, a main exporter of LNG to Asian nations, said the spot price was recovering at a modest rate and heading for former higher levels, only partially offsetting the lower prices on the bulk of LNG supply which is still in the grip of weak oil prices.

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Norway, the only European LNG exporter from its own plant, has signalled that exploration and production investment on the Norwegian Continental Shelf is alive and well with 33 energy companies applying for blocks in the latest licensing round.

The Norwegian Ministry of Petroleum and Energy has received its large number of applications in the licensing round for Awards in Predefined Areas (APA) 2020.

“In a challenging year for the petroleum industry, I am very pleased with the interest shown by companies for new licenses on the Norwegian Continental Shelf (NCS),” said Norwegian Minister of Petroleum and Energy Tina Bru.

“We have received a large number of applications, and this is important in order to make discoveries that will contribute to long-term value creation, employment and state revenues,” added the Norwegian Minister.

While Norway is a large-scale pipeline gas supplier to Western Europe in compeition to Gazprom, it is also the only European exporter of LNG from a baseload liquefaction plant at Hammerfest.

The plant on Melkoya island uses feed-gas from the Barents Sea and the facility was originally intended to be a supplier to the US East Coast before shale-gas turned the US into an exporter.

The offshore licence awards in the Nordic nation’s Predefined Areas (APA) is an annual round

for the best-known areas on the Norwegian Continental Shelf and most of the applicants are European based, though also include US, Japanese and Middle East companies.

The Ministry said that the total of 33 applications received by the deadline included a broad variety of companies, ranging from large international players to mid-sized companies and smaller exploration outfits.

The total number of applications is regarded as high and at around the level of the last few years.

“Predictable and stable framework conditions and an active licensing policy are two of the main pillars in the Government's petroleum policy,” explained Minister Bru.

The Ministry said it had received interest both in the newly included areas and in the previously announced APA-areas. Its objective is to award new production licenses in the announced areas at the beginning of 2021.

The first licensing round on the NCS took place in 1965. The activity started in the North Sea, and exploration in the Norwegian Sea and the Barents Sea started around 15 years later.

The petroleum sector is important for Norwegian employment, and a considerable number of people are employed directly or indirectly in the industry.

Monday, 05 October 2020 06:00

LNG North America – October 2020

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Strong seasonal rise in freight rates is unlikely to happen this autumn, as sustained outages at Sempra Energy’s Cameron LNG terminal in Louisiana and at Gorgon LNG Train-2 have caused a length in tonnage. Supply outages at the 13.5 mtpa Cameron facility free up an estimated 17 to 34 vessels per month, keeping freight rates subdued, and analysts expect full output to only return by the end of October.

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US billionaire investor Warren Buffett is expected to take control of Dominion Energy’s Cove Point LNG export plant in Maryland around November 1, 2020. In return, Dominion will receive about $2.7 billion in cash and transfer $5.3 billion of existing Dominion Energy Gas Holdings related indebtedness to the buyer – Buffets’ Berkshire Hathaway Energy.

The Cove Point liquefaction plant produces around 5.2 mtpa from a single Train and has tolling agreements with Gas Authority of India (GAIL) as well as Sumitomo and Tokyo Gas of Japan.

Dominion is also hoping to close another part of the sale, involving Questar Pipelines, upon receipt of anti-trust clearance on in early 2021. For that transaction, Dominion would receive around $1.3 billion in cash and transfer around $430 million of existing Questar Pipelines indebtedness to Berkshire Hathaway.

“This mutually agreed dual-phase closing is the result of updated timing expectations for receipt of the HSR clearance from the Federal Trade Commission related exclusively to the sale of Questar Pipeline and Overthrust Pipeline,” explained Dominion. “Given all closing conditions have been met (…), Dominion Energy and Berkshire Hathaway Energy have opted to move forward with an expeditious initial closing to be followed with a subsequent Questar Pipelines closing in early 2021.”

Irrespective of the sale, Dominion said it still expects to have strong end-of-year performance with operating earnings per share, normalized for weather, to be in the top half of its $3.37 to $3.60 guidance range.

Cove Point LNG closed for maintenance

Dominion Energy’s Cove Point LNG plant in Maryland has been closed for three weeks maintenance as US investor Warren Buffet is waiting to take control. Berkshire Hathaway’s energy unit has snapped up a 25 percent operating stake in the 5.2 mtpa Cove Point facility.

With the Cove Point deal, Buffett was concluding his first big acquisition since 2015. The Dominion-Berkshire Hathaway transaction is expected to close in the fourth quarter of 2020.

The US business tycoon and philanthropist Buffet earlier in 2020 made a move for an LNG and pipeline natural gas project

in Canada. But at the last minute he pulled out of the $6.7 billion LNG project deal in Quebec over concerns about infrastructure challenges.

While Berkshire Hathaway will control Cove Point LNG, another 25 percent of the liquefaction and export plant is already owned by Brookfield Asset Management of Canada under a deal finalized in October 2019. After the November closing of the transaction Dominion will retain a 50 percent passive stake in Cove Point. 

Spot price differentials between regional U.S. gas trading hub and the benchmark Henry Hub have narrowed in the first half of 2020 amid lower production and a Covid-19-related plunge in demand. Basis prices are set to stay narrow at most hubs, with Winter 2020/21 forward basis swaps for SoCal Citygate and Waha Hub averaging $1.11 per MMBtu and -$0.47 per MMBtu.

Making new pitches to investors, Tellurian Inc. forecasts that 100 million tonnes per annum of additional construction is needed because of LNG capacity constraints by 2021 as demand increases. Market observers say Tellurian may be still keen to bring India’s Petronet LNG on board.

Plans for debut trading in Hygo Energy at the US stock exchange NASDAQ have been shelved amid corruption allegations against the company’s CEO Eduardo Antonello. Hygo, a joint venture between Golar LNG and the U.S. private equity firm Stonepeak Infrastructure Partners, had plans to develop two LNG-to-Power projects in Brazil.

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The Brazilian lower house of the National Congress has approved a bill to further open up the natural gas and LNG terminal market to private competition and break the monopoly held by state-controlled energy company Petroleo Brasileiro, known as Petrobras.

The bill passed in early September by 351 votes for to 101 against will now go to the Senate for expected final authorization. The new legal framework changes natural gas distribution from a regime of concessions by the government to one of authorizations by the country’s oil and gas regulator, Agencia Nacional de Petróleo, Gás Natural e Biocombustíveis (ANP).

Analysts said the first result would be to reduce regulatory obstacles to building new LNG terminals, natural gas pipelines and other infrastructure needed by the South American nation. Petrobras was supposed to have lost the monopoly in the oil and gas sector by a law passed more than 20 years ago, though in practice kept a virtual monopoly in the natural gas industry.

High hopes for US$7bn in private investment

Brazilian congressmen argued that the new natural gas law would attract more than US$7 billion in private sector initial investments and generate millions of jobs.

Petrobras has gradually been scaling back control of Brazil’s energy industry by selling assets, including thousands of miles of pipelines. The state-owned oil and gas major began the binding phase in the sale process in July 2020 of its 10 percent remaining stake in gas pipeline firm Nova Transportadora do Sudeste (NTS) at the same time as reviving the possibility of floating LNG production from some of its prolific offshore oil and gas basins.

NTS provides natural gas transportation in a network of 2,048 kilometres located in the nation’s southeast and connecting Rio de Janeiro, São Paulo and Minas Gerais. The NTS system is also connected to the Bolivia-Brazil pipeline to the west and natural gas terminals to the east and south.

A group led by Canada’s Brookfield Asset Management Inc., which in October 2019 bought a stake in the Cove Point LNG plant in Maryland, purchased 90 percent of NTS from Petrobras in 2016 for $5.2 billion.

Ahead of the law being passed Brazil began the process to lease its LNG regasification terminal and associated facilities located in the northeast state of Bahia, a floating storage and regasification unit and the busiest in Brazil.

The Bahia terminal in Salvador is one of three controlled by Petrobras in Brazil. The two others are situated at Pecem in the northeast state of Ceara and at Guanabara in the state of Rio de Janeiro and which has been idle since 2018.

Opening up terminals for third party access

While Brazil’s three terminals have been significantly under-utilized, the government is now opening the way for third-party access. The natural gas reforms and the reduction in the market power of Petrobras began back in 2015 when the company finalised the sale of 49 percent of Gaspetro, the natural gas distribution firm.

Renewables other than hydro power are also expected to grow along with LNG-to-power projects led by companies such as Golar Power, a joint venture partnership comprising Golar LNG and US equity fund, Stonepeak Infrastructure Partners. Its activities are centred on northeast Brazil, including a project in Sergipe, the smallest Brazilian state. Golar Power has also signed an accord with the Brazilian state government of Pernambuco to develop an LNG import terminal in the Port of Suape.

The road to liberalisation has been long-winded and bumpy, analysts commented, but in the last 4 months the impetus for reform has taken hold. A new gas law will likely be enacted before December, effectively setting rules for a competitive gas market.

Today, the Brazilian gas market is small compared to its vast resource base and demand potential. It is also highly concentrated mainly due to the overreliance on Petrobras to develop and coordinate the gas market. Put in this prime position, Petrobras soon became the incumbent supplier by spreading out across each segment of the value chain, effectively crowding out competition.

To tackle the challenge, the Bolsonaro administration enacted liberalisation guidelines in 2019 under an initiative branded as the New Gas Market (NGM), calling for unbundling gas supply from transport and distribution; non-discriminatory third-party access in essential infrastructure; and the harmonization of tax rules.

The National Confederation of Industry, the largest industry association, said it believes liberalisation can bring prices down by 50 percent and triple investment in the sector to reach US$31 billion per year by 2030. For Economy Minister Paulo Guedes, the reform will bring a “shock of cheap energy” to the Brazilian industry, as government calculations suggested that a mere 10 percent reduction in the price of natural gas could increase industrial GDP by 2.1 percent.